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Want to start a small business?Take this Suze Oman's advice

A small business owner prepares boxes for shipping in the back office.

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Important advice worth following.

Key Point

  • Many small businesses take a long time to turn a profit.
  • When starting a business, it is important to have a solid cash reserve. That way, you can focus on your business without worrying about how to pay your bills.

There are good reasons to start your own business. For one thing, being your own boss means calling shots and doing things your way. You can also put yourself in a position where you can significantly increase your income by running your own business instead of being someone’s employee.

Additionally, as a small business owner, you may have various opportunities to give back to your community. If that’s something that’s important to you, it’s definitely a perk.

But if you’re starting a small business, having enough cash on hand is essential, says financial guru Suze Orman. Doing so will not only remove stress, but will increase your chances of success.

Good savings are essential

Orman loves emergency savings. And in recent years, she’s strengthened that recommendation in this regard by suggesting that everyone should strive to save enough money to cover eight to 12 months of living expenses.

But if you’re looking to start a business, you’re definitely going to need a very stable savings account balance, argues Orman. It can take a lot of time before a new business becomes profitable. So you need a way to pay bills until you start generating revenue.

But that’s not the only reason to take business ownership with lots of savings. Orman says building a strong emergency fund will allow him to focus more on running the business itself.

Marketwatch quotes Orman. “Starting a business takes 110% of your attention and energy. You can’t be distracted by worrying about how to pay your bills during the first few months of building your business. Have savings. My general advice is to be able to cover your living expenses for at least a year. For aspiring entrepreneurs, I recommend starting with a few more months of savings. “

Of course, building that level of cash reserves is not easy. Especially when you’re also spending money on equipment, licenses, and other items to run your business. But it’s worth taking Orman’s advice here. Even if that means waiting a little longer to get your business off the ground.

Bringing in a solid amount of savings will give you the mental energy you need to devote to your venture. Nor do I feel compelled to take on side jobs or other gigs just to cover my rent or put food on the table.

Advice worth following

About 20% of new businesses fail within two years of opening, according to data from the U.S. Bureau of Labor Statistics. If you don’t want to be part of that statistic, do your best to increase your savings before venturing on your own. , so you can focus on engaging customers for your business.